Yearender: A promising start ends with much difficulty for agriculture sector in 2008

The year 2008 started promisingly. Higher production targets were set for palay and corn. The hog and poultry sector were continuing their recovery while the fisheries sector sustained its growth.

Towards the end of the year, however, the early promise of growth had to be reviewed and the outlook for 2009 became unclear in the face of a global economic recession.

“It’s been a difficult year,” Agriculture Secretary Arthur C. Yap said, adding that, “just when things were going right for the rice sector, we got hit by high fertilizer prices.”

Thus, from an original target of over 17 million metric tons of palay this year, the Department of Agriculture now expects production to hit no more than 16.7 million MT.

“It’s been a rollercoaster ride,” he added.

For 2009, the DA chief is hoping rice production stabilizes “so that we can help poor families.”

Everything appeared to be in place at the start of 2008, with the DA very much ready with its hybrid and certified seeds program. The plant was to open up additional expansion areas for palay and its traditionally productive dry cropping season.

But even before the first quarter ended, the global rice crisis hit.

Years of benign neglect of the agriculture sector, particularly rice production, finally caught up with almost all the traditional rice producers – the Philippines, Vietnam and Thailand – with demand far outstripping supply.

The Philippines’ failure over the years to maintain and even increase its productivity finally came under the full glare of the global spotlight as the Philippines scrambled to purchase much needed rice stocks from a likewise depleted global rice market.

The Philippines, previously ranked as a major rice producer, even hosting the renowned International Rice Research Institute (IRRI), is now a major importer and its purchases are considered market moving.

Fearing the political fallout of a rice shortage, the Department of Agriculture’s National Food Authority (NFA) was forced to enter the global market and pay the premium price being sought by the remaining viable producers – Vietnam and Thailand.

The Philippines’ demand for its staple rice and willingness to pay the premium reaped criticism from global markets pointing out that the country’s purchases were driving up prices even more.

The crisis eventually ended and it appeared that the rice sector was set to get back on its feet. But then came the follow-up punch.

A rapid and sustained rise in crude oil prices translated to higher prices for petrochemical-based fertilizers. Thus, while farmers were ready and willing to plant and that the weather this year was milder compared to the 2007 typhoon season, the high cost of fertilizer inputs forced most farmers to cut their fertilizer usage by as much as 30 percent.

Even though the DA claims that new expansion areas were opened up for palay production, the lower use of fertilizers resulted in a lower than projected palay yield, forcing the Philippines once again to sink into the vicious cycle of having to resort to the global rice market to meet its own domestic demand for the grain.

With the lower than projected rice production this year, the NFA is now in the process of negotiating the importation of an initial 500,000 tons of rice from Vietnam.

The NFA, which has been criticized for its purchases of rice, has become even more opaque in its transactions.

Where in the past the NFA conducted public tenders for rice, it is now resorting to bilateral negotiations following criticisms that the Philippines’ rice importation has contributed to the global spike in rice prices.

Production in the corn sector, on the other hand, has been much better as local corn farmers have been enjoying higher domestic buying prices and almost no competition from imported corn.

The huge demand for corn for biofuel production has driven up global prices for corn which, in turn, has forced local feedmillers to stop importing the once cheaper imported corn.

The drop in demand from the hog sector, thus, created a balance for local corn producers resulting in sufficient supply this year.

Based on Bureau of Agricultural Statistics’ corn crop estimates and forecast data for January to December this year, total production is projected to increase from 6.736 million metric tons to 6.947 million MT for a 3.12 percent growth rate.

Aside from a higher domestic buying price of P11.50 per kilogram, corn farmers are now looking at the export sector.

The Philippine Maize Federation (Philmaize) had successfully negotiated the trial export of Philippine corn to Korea and is hoping that the high global prices for corn would hold.

But all is not rosy either for the corn sector, as three typhoons in the third quarter of this year and the rise in fertilizer prices put a dent on production.

Corn production in the third quarter of this year dropped 4.97 percent drop due to typhoons “Frank,” “Karen” and “Nina,” coupled with a reduction in the use of fertilizers and farmers shifting to other crops.

In the last quarter of the year, the government decided to lift the tariff on feedwheat, which is supposed to benefit the hog sector, but which corn farmers claim will be a disincentive for them to plant corn next year.

Corn is a major ingredient in feed production and feedwheat is a cheaper alternative.

Corn farmers, thus, fear that the demand they had been enjoying in 2008 may no longer be there in 2009. Lower demand, Philmaize warns, would convince farmers to plant less corn, resulting is a return to a domestic shortage and renewed reliance on imported corn.

The hog sector, on the other hand, is still trying to recover from the devastation it suffered in 2007 wherein a big chunk of backyard hog farmers were afflicted by the porcine reproductive respiratory syndrome (PRRS) which killed a substantial number of productive sows.

The livestock sub-sector from January to September this year contracted 1.97 percent mainly due to the decline in hog output.

As it turned out, PRRS was not the only thing detected in local hogs. Last October, the DA and US health authorities had detected the unsuspected presence of the Ebola Reston virus which has derailed the planned export of Philippine pork products from Mindanao to Singapore.

The detection of the Ebola Reston virus is significant because this is the first time it has been detected in swine.

In the past, the Ebola Reston virus was detected only in crab-eating macaques.

The jump of the virus from monkeys to swine is being flagged by the World Health Organization because of its potential impact on human health. The ability of the virus to mutate from species to species could potentially be harmful to humans.

Thus, the detection of the Ebola Reston virus in Philippine swines may have a long-lasting effect on the Philppine hog industry.

The poultry and fisheries sector managed to post a relatively stable year.

The local poultry sector managed to dodge competition from imported chickens and even benefited from the lower demand for pork.

After a consistent sharing, the fisheries sector now faces a long-term decline especially for the capture and municipal fisheries sub-sectors.

The agriculture sector accounts for a fifth of the gross domestic product (GDP).

It managed to post a 4.19 percent growth in the first three quarters of 2008 and is expected to post continued growth in the fourth quarter.–Marianne V. Go, Philippine Star